Mumbai: Shares of Wipro Ltd fell as much as 4.6% on Thursday as brokerage firms reduced its target price after the company reported lower-than-estimated March quarter earnings.
The stock touched a low of Rs274.10 a share during the day. At 9.40am, the scrip was trading at Rs276.20 on BSE, down 4% from its previous close. So far this year, it has declined 11.7% while BSE IT index has risen 19.1% in the same period.
The Bengaluru-based company also said that it does not expect any revenue growth in the current quarter, dashing hopes that India’s third largest information technology outsourcing company will turn the corner soon.
Kotak Institutional Equities has slashed FY20 constant currency revenues by 3-4% for Wipro. “The cut captures the additional information of slow pace of large deal ramp-ups and negative surprises in communications and India and Middle East businesses. A slower revenue has consequent impact on EBIT margins. we cut the same by 130-140 basis points (bps) for the next two years. Net result is 6-7% cut in FY2019-20 earnings per share (EPS) estimate," said Kotak Institutional Equities in a note to its investors
The brokerage firm has cut its target price to Rs280. “A weak portfolio of clients and business mix combined with a historical weakness of missing important strategic bets keep us cautious on Wipro," it added.
Wipro’s dollar revenue improved 2.4% sequentially to $2.06 billion in the three months to March (1.1% rise in constant currency terms). It had earlier outlined quarterly growth of at-best 3% in constant currency terms in the fourth quarter.
“Wipro continues to under-perform its peers in terms of growth. While management has alluded to strong order wins, conversion into revenue growth remains an issue. FY19E will be the 7th successive year of single digit dollar revenue growth for Wipro. Looking ahead, we would watch for improvement in Healthcare and Lifesciences and communications verticals," said Reliance Securities in a note to its investors.
The brokerage firm has retained its hold rating on the stock and revised its target price to Rs290 from Rs308 a share.
Wipro’s net profit in Q4 declined 8.6% to $277 million from $303 million in the preceding quarter, on account of the company making a one-time provision for two clients, including British contractor Carillion Plc and telecom operator Aircel, going bankrupt.
A Bloomberg survey of 28 analysts estimated Wipro to report revenue of $2.1 billion, or Rs13,924.2 crore, in the quarter. The analysts estimated the company to report a net profit of $321.47 million, or Rs2,127.5 crore, in the period.
“We expect Wipro to deliver lower than peer growth in FY19/20E, as the traditional businesses continue to deteriorate and growth in the Digital business continues to be at par with peers," said Emkay Global in 26 April note.
Brokerage firm Nomura has maintained its reduce rating and cut its target price to Rs270 from Rs287 a share. Emkay has maintained its reduce rating on the stock and revised its price target to Rs250 a share from Rs287 a share.